Is Jefferies Financial Group (JEF) Fairly Valued After Its Recent 13% One-Month Share Price Rebound?

Jefferies Financial Group (JEF) has experienced a notable 13% rebound in its share price over the past month, driven by robust Q3 2025 financial results and a recovery in key business segments. To assess whether this rally reflects fair valuation, we analyze the company's fundamental performance and relative metrics against industry benchmarks.

Fundamental Strength: Profitability and Earnings Growth

Jefferies demonstrated exceptional profitability in Q3 2025, with a diluted earnings per share (EPS) of $1.01 and total net revenues of $2.05 billion, surpassing analyst estimates. The company's return on adjusted tangible equity (ROATE) reached 13.6%, a significant improvement that underscores enhanced operational efficiency. This outperformance was fueled by strong performances in its Investment Banking and Capital Markets divisions, with advisory revenues hitting a record $656 million and Equities trading benefiting from elevated global volumes.

Earnings growth has been equally impressive. For Q3 2024, Jefferies reported an EPS of $0.75, a 225% increase compared to the prior year. Analysts project further growth, with EPS expected to rise by 39.68% to $6.16 per share in the next 12 months according to market analysis. Such momentum suggests a resilient business model, particularly in a sector where aggregate bank earnings declined by 7.0% year-over-year in Q3 2024.

Leverage and Risk Profile

Despite these gains, Jefferies' debt-to-equity ratio of 2.82 for the fiscal year ending 2024-11-30 remains elevated. While this level of leverage is not uncommon in the financial sector, it raises questions about long-term stability, especially in a low-interest-rate environment. However, the company's strong revenue growth and high ROATE mitigate some of these risks, as cash flows appear sufficient to service debt obligations.

Relative Valuation: P/E and P/B Ratios

Jefferies' valuation metrics appear attractive relative to industry peers. The stock trades at a forward P/E ratio of 14.7x, significantly below the financial sector's average P/E of 25.3x according to sector analysis. This discrepancy suggests the market may not be fully capitalizing on the company's earnings momentum. Similarly, its price-to-book (P/B) ratio of 1.02 is lower than the 1.13 average for regional banks according to financial data, indicating the stock is trading near-or slightly above-its tangible asset value.

However, a discounted cash flow (DCF) model suggests a fair value of $50.68 per share, compared to the current price of $61.90. This implies the stock may be overvalued based on intrinsic value calculations, even as its relative metrics suggest undervaluation. The divergence highlights the importance of reconciling forward-looking earnings expectations with historical cash flow patterns.

Conclusion: Balancing Strengths and Risks

Jefferies' recent performance validates its position as a high-growth player in the financial sector, with earnings growth and profitability metrics outpacing industry trends. Its relative valuation metrics-particularly the P/E and P/B ratios-suggest the stock remains attractively priced compared to peers. However, the DCF model's lower fair value estimate and the company's elevated leverage warrant caution.

For investors, the key question is whether Jefferies can sustain its earnings trajectory while managing debt levels. If the company continues to execute on its strategic priorities-such as expanding its Investment Banking and Capital Markets divisions-its current valuation may prove justified. Conversely, any slowdown in revenue growth or a rise in interest rates could pressure the stock.

In the short term, the 13% rebound appears warranted given the company's Q3 results. However, long-term investors should monitor leverage trends and earnings sustainability to determine if the valuation remains aligned with fundamentals.